Valuation Flashcards

1
Q

Tell me what the 5 methods of valuation are.

A
  1. Comparable
  2. Investment
  3. Residual
  4. Contractors
  5. Profits
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2
Q

Tell me about how you would value a building using the profits/contractors/investment/comparable/residual method of valuation.

A
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3
Q

How do you decide which valuation method to apply?

A
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4
Q

When and why would you use one of these methods?

A
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5
Q

What is a years purchase multiplier?

A
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6
Q

Give me an example of a good covenant and how this might impact a valuation.

A
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7
Q

How would you distinguish limitations on liability in your valuations?

A
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8
Q

Where in your valuation report do you state any limitations on liability?

A
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9
Q

What relevance does Hart v Large have on your valuation practice?

A
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10
Q

is a valuer’s liability usually limited to the overvaluation on the valuation date?

A
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11
Q

What would you do if you received a notice of a PII claim from a client or their solicitor?

A
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12
Q

Is there a difference between being negligent when undertaking a survey/valuation and providing negligent advice?

A
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13
Q

What is run off cover?

A
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14
Q

What is the Red Book?

A
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15
Q

Why does the Red Book exist?

A
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16
Q

Tell me about a factor which may impact value.

A
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17
Q

What is your duty of care as a surveyor when undertaking a valuation?

A
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18
Q

To whom do you owe this duty of care?

A
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19
Q

Why is independence and objectivity important when valuing?

A
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20
Q

Is there a separate UK National Supplement?

A
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21
Q

What is the UK valuation guidance called?

A
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22
Q

Why does the UK guidance exist?

A
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23
Q

How should this be applied in relation to the Global Red Book?

A
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24
Q

What was changed in the last update to the UK National Supplement?

A
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25
Q

Explain one UK VPS or UK VPGA that relates to your work as a valuer.

A
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26
Q

When was the Red Book last updated?

A
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27
Q

Does this differ from when IVS were last updated?

A
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28
Q

What changes were made?

A
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29
Q

Which do you follow - the latest IVS or the Red Book Global?

A
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30
Q

Which sections of the Red Book are mandatory and which are advisory?

A
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31
Q

What does PS1-2/VPS1-5/VPGAs relate to?

A
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32
Q

What type of advice does the Red Book cover?

A
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33
Q

If you provide preliminary advice / draft valuation report what should you state in writing to your client?

A
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34
Q

What type of valuations might be relied upon by a third party?

A
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35
Q

Tell me what the definition of MR/MV/investment value/fair value?

A
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36
Q

What is the difference between an assumption and a special assumption?

A
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37
Q

What sources of information would you consider when preparing a valuation report?

A
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38
Q

If you have previously valued an asset do you need to make any additional disclosures and what might they be?

A
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39
Q

If your firm is too small to have a rotation policy or valuation panel what else can you do to ensure objectivity?

A
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40
Q

When might a conflict of interest exist in relation to a valuation instruction?

A
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41
Q

What must be included in your terms of engagement / valuation report?

A
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42
Q

Where is this covered in the Red Book?

A
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43
Q

What is a restricted valuation service and can you provide one?

A
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44
Q

How do you deal with limitations on inspection or analysis?

A
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45
Q

Can you revalue a property without inspecting?

A
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46
Q

What RICS guidance relates to the use of comparable evidence?

A
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47
Q

What is an internal valuer?

A
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48
Q

Can an external valuer provide an internal purposes valuation?

A
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49
Q

What happens if market conditions change between the valuation date and report date?

A
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50
Q

Is special value from a special purchaser reflected in MV?

A
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51
Q

Where does the definition of fair value come from?

A
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52
Q

Does this differ from MV?

A
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53
Q

When is fair value used?

A
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54
Q

What are the 3 approaches under VPS5?

A
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55
Q

What is the Valuer Registration Scheme?

A
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56
Q

Are there any instances where certain sections of the Red Book may not apply?

A
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57
Q

What are these and which sections don’t apply?

A
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58
Q

What is the basis of value under UK GAAP FRS 102?

A
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59
Q

When would you use EUV?

A
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60
Q

What is the definition of EUV?

A
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61
Q

What additional criteria apply to secured lending valuations?

A
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62
Q

What information should you specifically request for a secured lending valuation?

A
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63
Q

What is a regulated purpose valuation?

A
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64
Q

What additional disclosures must be made for a regulated purpose valuation?

A
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65
Q

What is the basis of value for a statutory valuation?

A
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66
Q

What might a statutory valuation relate to?

A
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67
Q

What is the definition of the statutory basis of valuation?

A
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68
Q

Is this the same for all statutory valuations?

A
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69
Q

What is a yield?

A
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70
Q

What is a Net Initial Yield?

A
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71
Q

What is a reversionary yield?

A
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72
Q

What is an equated yield?

A
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73
Q

What is an equivalent yield?

A
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74
Q

How would a yield reported from auction differ from a Net Initial Yield?

A
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75
Q

What purchaser’s costs do you deduct from a valuation?

A
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76
Q

When do you deduct purchaser’s costs from a valuation?

A
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77
Q

How would you value a property in uncertain market conditions - does the Red Book give any guidance?

A
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78
Q

How could you value a long leasehold interest?

A
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79
Q

How does a term and reversion differ to a DCF?

A
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80
Q

What is the difference between a growth explicit and a growth implicit yield?

A
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81
Q

Give examples of each of these types of yield.

A
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82
Q

How would you value an under/over rented investment property?

A
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83
Q

When would you use a dual rate investment calculation?

A
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84
Q

Where can you find yield evidence from?

A
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85
Q

What is the hierarchy of evidence?

A
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86
Q

What would you do if comparable evidence was limited?

A
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87
Q

What is NPV?

A
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88
Q

What is IRR?

A
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89
Q

What is a term and reversion?

A
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90
Q

What is a hardcore and topslice?

A
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91
Q

What is a Discounted Cash Flow (DCF)?

A
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92
Q

What is a short-cut DCF?

A
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93
Q

When would you use a DCF?

A
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94
Q

What are the advantages of a DCF?

A
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95
Q

What are the disadvantages of a DCF?

A
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96
Q

What is a YP/PV/YP in perpetuity?

A
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97
Q

What is marriage value?

A
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98
Q

When would you include an element of hope value in a valuation?

A
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99
Q

Can you include hope value in a secured lending / mortgage valuation?

A
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100
Q

How would you value a ransom strip?

A
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101
Q

How does market value differ to investment value/fair value?

A
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102
Q

What is a dual capitalisation rate and when would you use one?

A
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103
Q

Is the profits/DRC method used for specialised or specialist property?

A
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104
Q

What type of properties would you use the profits method for?

A
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105
Q

What type of properties would you use the DRC method for?

A
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106
Q

When would you use the profits method?

A
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107
Q

What is intangible goodwill?

A
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108
Q

What is turnover / gross profit / net profit?

A
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109
Q

What are the steps to providing a profits valuation?

A
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110
Q

What is Fair Maintainable Turnover?

A
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111
Q

What is a Reasonably Efficient Operator?

A
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112
Q

Does the assessment of the REO include personal goodwill and trading potential?

A
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113
Q

What is personal goodwill?

A
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114
Q

What is trading potential?

A
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115
Q

How do you calculate the tenant’s proportion of rent in a profits valuation?

A
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116
Q

What is EBITDA?

A
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117
Q

What is Fair Maintainable Operating Profit?

A
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118
Q

How do you calculate the divisible balance?

A
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119
Q

What accounts information would you want to review for a profits valuation?

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120
Q

Do RICS provide any guidance on RLVs or valuing development property?

A
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121
Q

What is an RLV?

A
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122
Q

What is a development appraisal?

A
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123
Q

How do they differ?

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124
Q

How else can you value development land?

A
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125
Q

What is the basic process of undertaking a RLV?

A
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126
Q

What does a development appraisal show?

A
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127
Q

What are the key things you need to consider when appraising / inspecting a development site?

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128
Q

What else should you consider?

A
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129
Q

Tell me about your due diligence when undertaking a RLV.

A
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130
Q

What sources of information do you use when undertaking a RLV?

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131
Q

How can you assess development potential?

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132
Q

What is GDV/NDV?

A
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133
Q

How do you calculate GDV?

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134
Q

What do development costs include?

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135
Q

When do you apply VAT when assessing development costs?

A
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136
Q

Where can you source build costs from?

A
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137
Q

What are typical finance costs?

A
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138
Q

What would you apply finance costs to and on what basis?

A
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139
Q

What is an S curve?

A
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140
Q

What factors influence the decision to use an S curve when applying finance costs?

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141
Q

Is there a quick rule of thumb which can be used when applying finance costs?

A
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142
Q

What do holding costs typically include?

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143
Q

How do you typically calculate developer’s profit?

A
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144
Q

What are some typical inputs (and %/£) in a RLV?

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145
Q

What other criteria might be assessed in terms of performance measurement for a RLV?

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146
Q

What are the advantages/disadvantages of a RLV?

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147
Q

What is included in the development programme?

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148
Q

What is CIL?

A
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149
Q

What is S106?

150
Q

What are the differences between CIL and S106?

151
Q

What is CIL charged on?

152
Q

What is a Monte Carlo simulation?

153
Q

What is a sensitivity analysis?

154
Q

How do you carry out a sensitivity analysis?

155
Q

What variables might you change and why?

156
Q

What factors affect sensitivity of a development appraisal?

157
Q

Tell me about your understanding of incorporating affordable housing into development appraisals.

158
Q

Tell me about software you have used to provide a RLV.

159
Q

What RICS guidance relates to the valuation of development property?

160
Q

Give me a limitation of this software.

161
Q

What is viability?

162
Q

When would a cost approach be used?

163
Q

What type of buildings would a cost approach be used for?

164
Q

What is the supposition that a DRC is based upon?

165
Q

What are the 3 components of the cost approach?

166
Q

How do you assess the value of the land?

167
Q

How do you assess Gross Replacement Cost?

168
Q

What costs would you consider within GRC?

169
Q

What would you do if the building could be replaced with a modern equivalent?

170
Q

How would you deal with depreciation/obsolescence?

171
Q

What types of obsolescence are there?

172
Q

What are the three ways to deal with depreciation?

173
Q

Is the cost approach a market valuation?

174
Q

What liabilities may be created through valuation?

175
Q

What is a liability cap and when would one be used?

176
Q

Explain why the RICS are carrying out an Independent Valuation Review.

177
Q

Who is leading this?

178
Q

Explain what you understand by the term

A

margin of error.

179
Q

How can a NIY of zero be achieved?

180
Q

In a scenario where rents are static and the capital value increases would you expect yields to increase or decrease?

181
Q

What does heterogenous mean in terms of comparable evidence?

182
Q

What does the term ‘tone of value’ mean to you?

183
Q

What are current mortgage rates (on a BTL mortgage)?

184
Q

How have they changed over the past few years?

185
Q

What are current LTV ratios?

186
Q

How could you value an HMO using the investment method?

187
Q

What were you specifically looking for in relation to the HMO use?

188
Q

How can you establish if a property is an HMO?

189
Q

What are the minimum rooms sizes for an HMO?

190
Q

What is statutory overcrowding?

191
Q

What legislation relates to this?

192
Q

Tell me about any other legislative requirements relating to HMOs you are aware of.

193
Q

What planning use do HMOs fall into.

194
Q

Is there generally a premium attributable to HMO use over and above value as a single family house?

195
Q

Why did you use an investment method of valuation?

196
Q

What is an Article 4 direction?

197
Q

How might gross and net yields differ for HMOs?

198
Q

What RICS guidance are you aware of relating to HMO valuation?

199
Q

Was there any UK-specific guidance you also complied with?

200
Q

What category of buy-to-let valuation does a HMO fall within?

201
Q

What are some of the broader issues facing the HMO sector?

202
Q

Tell me about the regulation of the HMO sector.

203
Q

How can rental incentives impact on HMO valuation?

204
Q

What are guaranteed rents / cash backs in lieu of rental income and how can these impact upon value?

205
Q

How can Market Rent impact upon the underwriting of a loan?

206
Q

How have you commended upon any limitations to accuracy of your HMO valuations?

207
Q

How can maintenance costs impact upon valuation and what does the Red Book say about these for HMOs?

208
Q

When is it reasonable to adopt the income approach when valuing HMOs under the Red Book?

209
Q

What additional considerations do you need to make for category 3 scenarios?

210
Q

What is a lifetime mortgage/home reversion/sale and rent back/home purchase plan?

211
Q

What are the Red Book requirements in relation to these?

212
Q

What is shared ownership/shared equity scheme?

213
Q

How would you value a shared ownership / shared equity scheme property?

214
Q

What is a trustee mortgage valuation?

215
Q

What legislation relates to this?

216
Q

What is affordable/market rent?

217
Q

What is your role in relation to advising a lender client?

218
Q

What liability do you have to the borrower when advising a lender client?

219
Q

Does this vary depending on whether the valuation is disclosed by the mortgagee?

220
Q

Tell me about the requirements in relation to your terms of engagement / inspection.

221
Q

What is the basis of value?

222
Q

What factors may have a material impact on value?

223
Q

What assumptions / special assumptions have you made in relation to this?

224
Q

What is reinstatement cost and when would you be asked to provide it?

225
Q

How would you calculate it?

226
Q

How would you deal with suspected hidden defects?

227
Q

How would you treat incentives?

228
Q

Tell me about the application of the RICS Residential Mortgage Specification in relation to a specific purpose

229
Q

Where would you find the RICS Residential Mortgage Specification?

230
Q

What are the 3 categories of BTL investments?

231
Q

Have you valued a historic building?

232
Q

What RICS guidance were you aware of?

233
Q

Can you tell me a key principle of this guidance?

234
Q

How do you reflect the historic nature of a building in your valuation advice?

235
Q

What type of RICS surveys include a valuation?

236
Q

What level of valuation advice does a Level 2 Home Survey include?

237
Q

What guidance does the RICS provide in relation to this?

238
Q

What is the basis of valuation in this type of report?

239
Q

What assumptions are made in this type of report?

240
Q

What else do you need to include in relation to your valuation?

241
Q

Tell me about the RICS guidance relating to the valuation of individual new-build homes.

242
Q

What is the new build premium?

243
Q

How would a valuation of new build home differ to a second hand home?

244
Q

Tell me about how you have applied this guidance to a new build valuation.

245
Q

What is a key principle of this document?

246
Q

Tell me about your use and understanding of AVMs.

247
Q

Does the RICS provide any guidance on this?

248
Q

What is an AVM?

249
Q

What is an advantage and a disadvantage of using an AVM?

250
Q

Give me an example of an AVM you have used.

251
Q

Have you valued a residential property purpose built for renting?

252
Q

What RICS guidance are you aware of in relation to this?

253
Q

What are the key principles?

254
Q

What are the three key pieces of legislation which have impacted the UK residential market (and purpose built valuation)?

255
Q

What valuation considerations would you take into account when valuing a purpose built for renting property?

256
Q

What is the difference between a gross and net yield in this respect?

257
Q

What factors influence yields?

258
Q

What residential operating expenses would you need to take into account?

259
Q

What is Net Operating Income?

260
Q

How would you calculate it?

261
Q

Have you valued a BTL / HMO property?

262
Q

What RICS guidance are you aware of in relation to this?

263
Q

When was it last updated and what changes were made?

264
Q

What are the key principles?

265
Q

How might the release of a large number of new build properties impact the local market?

266
Q

Can ‘hope value’ be considered in valuations falling under UK Appendix 10?

267
Q

If Market Value is assessed prior to or during construction should the valuation reflect the evidence and market at the date of valuation or an assumed completion date?

268
Q

Is there a set discount for a new build premium?

269
Q

What do RICS say about sales incentives?

270
Q

Should you reflect sales incentives in your valuation?

271
Q

Where would you find details of incentives?

272
Q

When and why would you review a UK Finance Disclosure of Incentives Form?

273
Q

What are some of the ways that a home can be offered at a reduced price?

274
Q

What is a new build warranty?

275
Q

How long would a typical warranty last for?

276
Q

If a property was built in the last 10 years and does not have a professional certificate or guarantee/warranty would this affect value?

277
Q

What are the two special assumptions relating to Projected Market Value (PMV) and when would you adopt PMV?

278
Q

What are some of the types of home finance product?

279
Q

Who further regulates valuations for home finance products?

280
Q

What are the key differences between a lifetime mortgage and a conventional mortgage?

281
Q

Would the amount of mortgage debt to be redeemed at the end of a lifetime mortgage term be less or more than that of a conventional mortgage?

282
Q

What is home reversion?

283
Q

What is sale and rent back?

284
Q

What is a home purchase plan?

285
Q

What are the bases of value for a registered social landlord’s housing stock for secured lending purposes?

286
Q

What is a statutory valuation?

287
Q

Who is responsible for Council Tax valuations?

288
Q

What Council Tax bands exist in England?

289
Q

What is the basis of value for Council Tax valuations?

290
Q

What assumptions are made in a Council Tax valuation?

291
Q

What is the Right to Buy?

292
Q

What legislation relates to Right to Buy?

293
Q

When might a lender instruct a drive-by valuation?

294
Q

What is the impact of the Rentcharges Act 1977?

295
Q

Within what general distance of a dwelling might Japanese Knotweed have a material impact on value?

296
Q

What is leasehold enfranchisement?

297
Q

How does it differ for flats and houses?

298
Q

What is the basis of valuation?

299
Q

What is the basic procedure of leasehold enfranchisement?

300
Q

Who can serve a valid notice to enfranchise/extend on the freeholder?

301
Q

How could a mortgagee seeking remedy from a defaulting borrower serve a valid notice?

302
Q

How would you value a long leasehold property with a rising ground rent which increases significantly in a fairly short period?

303
Q

Do RICS publish any guidance on leasehold reform?

304
Q

What right did the Leasehold Reform Act 1967 introduce?

305
Q

What is the definition of a house under the Leasehold Reform Act 1967?

306
Q

What are the qualification criteria to acquire the freehold of a house?

307
Q

How long is a ‘long tenancy’?

308
Q

Which section are the bases of valuation set out in?

309
Q

What does the Section 9 (1) basis of valuation comprise?

310
Q

What does the Section 9 (1A) basis of valuation comprise?

311
Q

What does the Section 9 (1C) basis of valuation comprise?

312
Q

Which is the most favourable basis of valuation?

313
Q

How is a claim to acquire a freehold started?

314
Q

What is the main impact of the tenant’s notice?

315
Q

How long does a landlord (reversioner) have to respond to the tenant’s notice?

316
Q

If a landlord intends to reoccupy or redevelop what Sections can they rely on?

317
Q

If the parties cannot agree on a price where is the matter referred to?

318
Q

What is marriage value?

319
Q

What is hope value?

320
Q

How is marriage value calculated?

321
Q

What is the deferment rate?

322
Q

What right did the Leasehold Reform Housing and Urban Development Act 1993 introduce?

323
Q

What is the basis of a new lease for a flat under the 1993 Act?

324
Q

What is the basis of valuation in Schedule 13 for the new lease premium under the 1993 act?

325
Q

How long can a lease be extended for?

326
Q

Is a premium payable upon the grant of an extended lease?

327
Q

What are the additional qualification criteria if the long leaseholder of a house wishes to extend their lease (rather than acquire the freehold)?

328
Q

What are the ways to calculate a modern ground rent?

329
Q

Does a leaseholder have to pay the landlord’s reasonable professional costs?

330
Q

What valuation approach should be used to assess the value of the freeholder’s loss (or landlord’s diminution in value)?

331
Q

When does marriage value generally become payable?

332
Q

What is collective enfranchisement?

333
Q

What does the collective enfranchisement price under Schedule 6 include?

334
Q

What is the capitalisation rate?

335
Q

What is the Delaforce (1970) effect?

336
Q

Explain your understanding of Sloane v Mundy and Reiss v Ironhawk Ltd.

337
Q

Explain the impact of Cadogan Square Properties Ltd v Earl Cadogan and Cadogan v Erkman.

338
Q

What precedent was set by the Zucconi and Deritend cases in relation to relativity?

339
Q

What is an adverse differential?

340
Q

What is leasehold relativity?

341
Q

What is relative value?

342
Q

What do you understand by a Graph of Relativity?

343
Q

Who produces graphs of relativity?

344
Q

Do these graphs vary with different types or locations of property?

345
Q

What is the Parthenia Model?

346
Q

Explain what you understand in relation to the issue of ‘down valuation’.

347
Q

What RICS guidance relates to residential leasehold properties and secured lending valuation?

348
Q

What principles from this are you aware of?

349
Q

What sections of the Red Book and the UK National Supplement should this guidance be read alongside?

350
Q

What length of unexpired lease term does the guidance relate to?

351
Q

Why does it not relate to unexpired lease lengths below this?

352
Q

What factors might affect the valuation of a leasehold property according to the Guidance Note?

353
Q

What assumptions might be made in this type of secured lending valuation?

354
Q

What special assumption might be agreed and why with the lender client?

355
Q

What methods are available to value a leasehold property and when/why might you adopt each?

356
Q

When would you use a leasehold relativity graph?

357
Q

How would you choose which leasehold relativity graph to use?

358
Q

What would you use a magnet / plumb bob / spirit level for during an inspection?

359
Q

How would you value a property affected by Japanese Knotweed?

360
Q

What does the legal case of Ryb v Conways (2019) say about the valuation of property affected by Japanese Knotweed?

361
Q

What valuation approach does the RICS recommend is taken when valuing property is affected by Japanese Knotweed?

362
Q

What guidance sets this approach out?

363
Q

What is the House Price Index and how would you use it when valuing a residential property?

364
Q

What are some of the key drivers of demand for housing?

365
Q

How would you assess and report on condition in an investment valuation?

366
Q

How could a S106 agreement affect the valuation of a new build home?

367
Q

How would you analyse a part-exchange comparable?

368
Q

What is a neighbourhood in terms of residential valuation and why do you need to understand this concept?

369
Q

When analysing comparable evidence how would you apply the concept of adjusted value?

370
Q

What residential design features do you consider add value in your locality?